5 Legal Duties Company Directors Can’t Afford To Ignore

5 Legal Duties Company Directors Can’t Afford To Ignore

March 6, 2017

What is a Company Director?

A company Director is usually appointed by the members of a company to manage the business of the company on their behalf. In most “LTD” companies the Directors and the members are the same people, however, every person who plans to become a Director, should be familiar with the legal obligations and responsibilities that come with the position.

On appointment every Director signs the following consent:

I acknowledge that, as a Director, I have legal duties and obligations imposed by the Companies Act, other statutes and at common law”.

Under the Companies Act 2014, Directors fiduciary duties are now codified into the following:

  1. Act in good faith in what the director considers to be the interest of the company;
  2. Act honestly and responsibly in relation to the conduct of the affairs of the company;
  3. Act in accordance with the company’s constitution and exercise his or her powers only for the purposes allowed by law;
  4. Not benefit from or use the company’s property, information or opportunities for his or her own
  5. or anyone else’s benefit unless the company’s constitution permits it or a resolution is passed in a general meeting;
  6. Not agree to restrict the director’s power to exercise an independent judgment unless this is expressly permitted by the company’s constitution;
  7. Avoid any conflict between the director’s duties to the company and the director’s other interests unless the director is released from his or her duty to the company in relation to the matter concerned;
  8. Exercise the care, skill and diligence which would be reasonably expected of a person in the same position with similar knowledge and experience as a director. A director may be held liable for any loss resulting from their negligent behaviour.
  9. Have regard to the interests of employees and members.

Statutory Duties of Directors:

This section will deal with the 5 most common statutory duties, that Directors must comply with. Failure to comply with such obligations, will be treated as a breach of the Companies Act 2014 and can give rise to prosecution.

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